[Cite as Fannie Mae v. Hicks, 2016-Ohio-7483.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 103804
FANNIE MAE
PLAINTIFF-APPELLANT
vs.
LYNDA L. HICKS, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-11-746293
BEFORE: Stewart, J., Keough, P.J., and Boyle, J.
RELEASED AND JOURNALIZED: October 27, 2016
ATTORNEYS FOR APPELLANT
John E. Codrea
David B. Bokor
Matthew P. Curry
Matthew J. Richardson
Justin M. Ritch
Manley, Deas & Kochalski, L.L.C.
P.O. Box 165028
Columbus, OH 43216
ATTORNEYS FOR APPELLEE
John Wood
281 Corning Drive
Bratenahl, OH 44108
Stephen D. Williger
Thompson & Hine, L.L.P.
3900 Key Center
127 Public Square
Cleveland, OH 44114
Also Listed:
Unknown spouse of Lynda L. Hicks, pro se
1244 Adams Street
Fairborn, OH 45324
MELODY J. STEWART, J.:
{¶1} Plaintiff-appellant Federal National Mortgage Association (“Fannie Mae”)
appeals a trial court order that simultaneously denied its Civ.R. 60(B)(4) motion to vacate
a foreclosure sale while requiring that it pay $110,000 in restitution to defendant-appellee
Lynda Hicks pursuant to R.C. 2329.45. For the reasons that follow, we reverse the
decision of the trial court.
{¶2} The facts of this case involve a prior appeal, Fannie Mae v. Hicks,
2015-Ohio-1955, 35 N.E.3d 37 (8th Dist.). In that case, Hicks executed loan documents
(a note and mortgage) with All American Home Lending, Inc. in 2004 to finance the
purchase of a home in the city of Shaker Heights. All American later assigned the
mortgage to Chase Manhattan Mortgage Corporation. When Hicks failed to make
payments on the note, Chase Manhattan accelerated the loan and assigned the mortgage to
Fannie Mae.
{¶3} Fannie Mae brought a foreclosure action against Hicks. In the complaint,
Fannie Mae alleged that it was assigned the subject mortgage and was a “person entitled
to enforce the note.” Fannie Mae attached copies of the note and mortgage to the
complaint, along with an allonge containing a special endorsement of the note from Chase
Manhattan to Fannie Mae. During the course of litigation, Fannie Mae amended its
complaint twice to reflect the fact that the original note executed by Hicks in favor of All
American was lost by Chase Manhattan before it was purchased by Fannie Mae. Despite
this irregularity, Fannie Mae moved for summary judgment in the foreclosure action. In
its motion for summary judgment, Fannie Mae conceded that it was not entitled to enforce
the lost note under R.C. 1308.38, but nevertheless argued that it was entitled to foreclose
on the property by virtue of the mortgage assignment alone. Hicks filed a motion for
summary judgment arguing that she was entitled to judgment as a matter of law because
Fannie Mae conceded it could not enforce the note and the ability to enforce the note is a
prerequisite to establishing one’s right to foreclose. The trial court granted Fannie Mae’s
motion and denied Hicks’s motion. Hicks appealed.
{¶4} On appeal, this court concluded that the assignment of the mortgage alone
was insufficient to sustain an action in foreclosure and that Fannie Mae must also be a
person entitled to enforce the note in order to foreclose on the property.1 The panel of
this court further concluded that Chase Manhattan retained authority to enforce the note
as the last party in possession of the note before it was lost. The grant of summary
judgment in favor of Fannie Mae was reversed and the case remanded to the trial court
with instructions to enter summary judgment in favor of Hicks.
{¶5} While the resolution of the appeal was pending in this court, the trial court
proceeded with the foreclosure sale. In December 2014, Fannie Mae purchased the
property for a $110,000 credit bid2 and the sale was confirmed. Hicks neither requested
The Ohio Supreme Court recently affirmed this point of law in Deutsche Bank Natl. Trust
1
Co. v. Holden, Slip Opinion No. 2016-Ohio-4603, ¶ 27.
A credit bid allows a secured judgment creditor to bid on property up to the amount of the
2
debt owed, in lieu of making a cash bid. See, e.g., Benchmark Bank v. Weaver, Franklin C.P. No.
a stay of the confirmation proceedings nor appealed the confirmation order to this court.
However, Hicks did move the trial court for a stay of the distribution of the sale proceeds
pending our decision on the foreclosure action. The court denied the motion, and Hicks
did not seek any further stays. This court issued its decision in May 2015. One week
after the decision, Fannie Mae was issued the deed to the property. The deed was
recorded on June 12, 2015.
{¶6} Following the release of this court’s decision, Hicks filed a proposed
judgment entry with the trial court that sought to have the court order Fannie Mae to pay
her restitution in the amount of $110,000, the foreclosure purchase price of the property,
pursuant to R.C. 2329.45, and dismiss the foreclosure action with prejudice. Fannie Mae
opposed the proposed order and asked the court to vacate the confirmation of sale and
deed pursuant to Civ.R. 60(B)(4), which allows a court to vacate a judgment when “the
judgment has been satisfied, released or discharged, or a prior judgment upon which it is
based has been reversed or otherwise vacated, or it is no longer equitable that the
judgment should have prospective application.” In its Civ.R. 60(B) motion for relief
from judgment, Fannie Mae emphasized that the balance of equities required the court to
vacate the confirmation of sale so that Fannie Mae can return title of the property to
Hicks, rather than order restitution in the amount of the purchase price, because the latter
remedy would result in a windfall to Hicks. Additionally, Fannie Mae argued that an
13 CV 011809 (June 2, 2014); see In Re Philadelphia Newspapers, L.L.C., 599 F.3d 298 (3d
Cir.2010).
order of restitution was improper under R.C. 2329.45 because Hicks failed to meet the
requirements of the statute that, according to Fannie Mae, requires that the property be
unrecoverable and that Hicks had previously obtained a stay of the distribution of
proceeds.
{¶7} Hicks opposed Fannie Mae’s motion for relief from judgment. Her
opposition brief argued that the plain language of R.C. 2325.03 and 2329.45 prevents
Fannie Mae from returning title, and that the correct remedy in situations where property
is sold pending appeal and the judgment is reversed is to order restitution.
{¶8} After considering both sides of the argument, the trial court issued an order
denying Fannie Mae’s Civ.R. 60(B)(4) motion and further ordered that Fannie Mae pay
Hicks $110,000 in restitution in accordance with R.C. 2329.45.
{¶9} In the appeal now before us, Fannie Mae raises two assignments of error: 1)
that the court erred by denying its Civ.R. 60(B)(4) motion to vacate the confirmation of
sale and deed; and 2) that the court erred as a matter of law, or in the alternative, abused
its discretion by ordering Fannie Mae to pay $110,000 in restitution to Hicks. We find
merit to Fannie Mae’s position, but for reasons different than those it argues. Because
the assignments of error are interrelated, we address them together.
{¶10} R.C. 2325.03 states that:
The title to property, which title is the subject of a final judgment or order
sought to be vacated, modified, or set aside by any type of proceeding or
attack and which title has, by, in consequence of, or in reliance upon the
final judgment or order, passed to a purchaser in good faith, shall not be
affected by the proceeding or attack; nor shall the title to property that is
sold before judgment under an attachment be affected by the proceeding or
attack. “Purchaser in good faith,” as used in this section, includes a
purchaser at a duly confirmed judicial sale.
This section does not apply if in the proceeding resulting in the judgment or
order sought to be vacated, modified, or set aside, the person then holding
the title in question was not lawfully served with process or notice, as
required by the law or Civil Rules applicable to the proceeding.
{¶11} R.C. 2329.45 states:
If a judgment in satisfaction of which lands or tenements are sold is
reversed on appeal, such reversal shall not defeat or affect the title of the
purchaser. In such case restitution in an amount equal to the money for
which such lands or tenements were sold, with interest from the day of sale,
must be made by the judgment creditor. In ordering restitution, the court
shall take into consideration all persons who lost an interest in the property
by reason of the judgment and sale and the order of the priority of those
interests.
{¶12} R.C. 2325.03 and 2329.45 evidence a general predisposition to favor and
protect purchasers who have obtained title to property through judicial foreclosure sales.
Pursuant to R.C. 2325.03, title to property remains with a good faith purchaser despite
attempts after final judgment, to set aside, vacate or modify a judgment under which the
property was purchased. 3 Moor v. Parsons, 98 Ohio St. 233, 120 N.E. 305 (1918)
The R.C. Chapter 2325 is titled “relief after judgment.” Although now repealed, former
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section R.C. 2325.01 set forth a list of grounds for vacation of a voidable judgment. Civ.R.
(explaining former analogous statute G.C. 11633); see also Civ.R. 60(B) (staff notes
contained in the commentary). Similarly, R.C. 2329.45 protects purchasers from losing
title, or from title otherwise being affected, by the reversal of a foreclosure judgment on
appeal, while also providing a remedy in the form of restitution to the former, aggrieved
title holder. By their nature, the statutes are shields, not swords. Their intent is to
safeguard a purchaser’s title from legal attack so that potential purchasers are not
dissuaded from investing in foreclosed properties for fear of losing their investment.
See, e.g., Moor at 244-245.
{¶13} Hicks argues that R.C. 2325.03 specifically prohibits title from being set
aside or affected by an attack on a final order conferring title and therefore contends that
Fannie Mae cannot convey title back to her through a Civ.R. 60(B) motion to vacate the
confirmation order. Accordingly, Hicks maintains that her only remedy is restitution
under R.C. 2329.45. Although a plain reading of the statutes seemingly supports
Hicks’s interpretation, this case is distinguishable from most cases discussing the
protections and remedies of R.C. 2325.03 and 2329.45 because Fannie Mae is both the
foreclosing plaintiff and the purchaser of the property. As such, neither statute applies in
this instance.
60(B)(commentary). Courts had formerly interpreted R.C. 2325.03 as a limitation on a party’s right
to proceed under R.C. 2325.01. See Stewart v. Kellough, 104 Ohio St. 347 (1922), at syllabus
(interpreting former analogous statute). Civ.R. 60(B) now provides the process and grounds for
seeking relief after judgment. Accordingly, it follows that R.C. 2325.03 serves as a limit on motions
to vacate judgments under Civ.R. 60(B).
{¶14} In Cent. Natl. Bank v. Great Lakes Distilleries, Inc., 8th Dist. Cuyahoga
No. 16905, 1939 Ohio Misc. LEXIS 1169 (Jan. 20, 1939), this court concluded that G.C.
11702, the former analogous statute with identical relevant language to R.C. 2329.45,
“has no application whatsoever” when the plaintiff in a foreclosure action purchases the
property at judicial sale, because the plaintiff “does not stand in the position of a
stranger.” Id. at 5, citing Hubbell v. Admrs., etc., of Broadwell, 8 Ohio St. 120 (1837);
McBain v. McBain, 15 Ohio St. 337 (1864); Ins. Co. v. Sampson, 38 Ohio St. 672
(1883). This court further stated,
The statutory provision [(G.C. 11702, former R.C. 2329.45)] is not effective
under the facts in this case to preculde [sic] a reversal of the judgment
entered in the trial court from operating to set aside, vacate and nullify
everything done under and in pursuance of said judgment; we therefore
conclude that the sale made under the first decree of foreclosure was
vacated when the judgment, upon the authority of which the sale was made,
was reversed by the Court of Appeals, which judgment of the Court of
Appeals was not thereafter reversed or modified by the Supreme Court.
Id.
{¶15} Consequently, Great Lakes Distilleries sets forth three conclusions relevant
to the present appeal. First, that the former R.C. 2329.45 operates to protect the title of a
third-party purchaser, not a plaintiff purchaser, where the judicial sale occurs prior to the
reversal of a foreclosure order. Second, that the former R.C. 2329.45 does not operate
to provide restitution to the defendant-debtor when the purchaser is not a third party.
And finally, that reversal of a foreclosure order in such instances operates, as a matter of
law, to set aside, vacate, and nullify the sale of the property.
{¶16} Great Lakes Distilleries is still the law in this district.4 It has not been
overruled by the Ohio Supreme Court nor has any subsequent legislative action clarified
the terms of R.C. 2329.45 to require an alternate interpretation. Accordingly, the holding
in Great Lakes Distilleries that R.C. 2329.45 applies only to third-party purchasers,
controls the outcome of this case.
{¶17} The court erred as a matter of law by not vacating the foreclosure sale and
by ordering Fannie Mae to pay Hicks $110,000 in restitution. This court’s reversal of the
foreclosure order served to nullify the foreclosure sale and confirmation order. See
Great Lakes Distilleries, 8th Dist. Cuyahoga No. 16905, 1939 Ohio Misc. LEXIS 1169, at
5. Accordingly, we reverse the trial court’s order of restitution and the denial of Fannie
Mae’s Civ.R. 60(B) motion. On remand, the trial court is instructed to vacate the
confirmation of sale, order title to the property be returned to Hicks, and enter judgment
in favor of Hicks on the foreclosure action, pursuant to this court’s order in Hicks,
2015-Ohio-1955, 35 N.E.3d 37 (8th Dist.)
{¶18} Judgment reversed and remanded to the trial court for further proceedings
consistent with this opinion.
It is ordered that appellant recover of appellee the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
More recent decisions from other districts have also interpreted R.C. 2329.45 as protecting
4
the title of a third-party purchaser. See, e.g., Bankers Trust Co. of Cal., N.A. v. Tutin, 9th Dist.
Summit No. 24329, 2009-Ohio-1333, ¶ 15.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
______________________________________________
MELODY J. STEWART, JUDGE
KATHLEEN ANN KEOUGH, P.J., and
MARY J. BOYLE, J., CONCUR